Indie labels stage another Spotify walkout

Updated. Spotify may be the belle of the ball right now, making deals with everyone to get its music streaming service out there — but not everyone’s happy.

According to a report in music magazine The Wire, STHoldings — a British distributor that specializes in electronic music — said that almost every one of the 238 small labels it works with would be pulling out of several streaming agreements. And although the headlines have focused on Spotify, the reality is that the move also includes Rdio, Napster and the German service Simfy.

STH and its partners aren’t the first to make this move: in fact there’s been a steady stream of independent labels deciding to quit Spotify and the rest this year, something outlined deftly by Robert Andrews over at PaidContent:UK. In fact, just yesterday a heavy metal label called Sumerian made the same move.

So what’s their problem? Put simply, they aren’t getting paid enough.

Essentially, it’s the disparity between consumption and compensation: people are doing a lot of listening on Spotify, but labels and artists don’t see a great deal of cash. That’s particularly true for indie outfits, because the majors — Sony, BMG and Universal — own a chunk of Spotify. And it’s made worse by the fact that Spotify doesn’t pay labels directly, but through rights agencies — with whom it has made a secret deal. In the end, it means that indie labels feel they’re getting the raw end of the deal.

ST’s owner, Andrew Parkinson, told Music Week that the income from streaming was “negligible” and unsustainable.

“Despite these services offering promotion to many millions of music listeners we have concerns that these services cannibalise the revenues of more traditional digital services. These concerns are confirmed in our own accounts and a recent study by NPD Group and NARM.”

And there’s the rub: the study he refers to, out this week and reported by Digital Music News, suggested that on-demand access (such as streaming) was replacing purchasing for many music fans. That is important, because it makes the argument about streaming much more complex: until now, the argument in favor of streaming had broadly been that on-demand services fill the same sort of function as radio: a discovery system that leads to purchasing.

But the NPD and NARM numbers suggest that, for many people at least, the opposite is true — having music streamed on demand made them less likely to purchase. That’s what many have worried about for a long time, and it seems now they are starting to act.

And in addition to the study data, there’s the simple fact that a software startup has come out of nowhere to become a financial entity that dwarfs most of those it relies on for content. That idea — that streaming platforms are making a shedload of money off artists and giving almost nothing back — was thrown into particular relief by the $4 billion sale of EMI this week. Months earlier Spotify had raised $100 million $1 billion valuation.

The boycott is a sour note for Spotify, which yesterday was trumpeting its rollout in three new countries, Australia Austria, Belgium and Switzerland. But although the actions of these tiny labels aren’t going make big waves with consumers, the pebbles keep falling into the pond — and it looks like the antipathy between independents and streaming services won’t be dying off any time soon.

Update: NARM, the National Association of Recording Merchandisers and the sponsor of the survey, has now put out a statement pointing out that Spotify was not specifically named in its report — in fact, the survey was done at the same time as Spotify’s launch (so it would hardly make an impact on people’s behavior). According to NARM chief Jim Donio:

“[Digital Music News’] Paul Resnikoff’s citing of Spotify in this story is incorrect; no specific access services were named in the NARM/NPD report, and in fact Spotify had only just launched in the U.S. when this survey was conducted. There are many different types of music access models, and licensed services such as Spotify, which do pay royalties for the music on their services, are an increasingly important part of the mix of digital retail options for consumers.”

That will please Spotify (which is happily circulating the statement) but it doesn’t really change the broader situation: STHoldings says it made its decision based on the NARM study, and Spotify isn’t the only service affected.